A Fiscal Policy Report Card on America Governors: 1994

Stephen Moore is director of fiscal policy studies and
Dean Stansel is a research assistant at the Cato Institute.

Executive Summary

This study presents an objective, comparative analysis
of the spending and taxing policies of 47 of America's governors. In effect, it is a report card on their fiscal performance.

For each of the governors who were elected before 1991,
we constructed a 14-variable index of fiscal performance.
The variables used include measurements of the change in
state expenditures, the change in state tax rates, and the
change in the tax burden in each state under each current
governor. For the 13 governors who took office after July
1991, we explored similar but fewer fiscal policy variables
based on budget and tax changes enacted through fiscal 1994.

Three governors receive A's on our fiscal policy report
card: L. Douglas Wilder of Virginia, Stephen Merrill of New
Hampshire, and Kirk Fordice of Mississippi. Five governors
receive F's: Lowell Weicker of Connecticut, James Florio of
New Jersey, John Waihee of Hawaii, James Hunt of North Carolina, and Thomas Carper of Delaware. Other prominent governors and their grades, from best to worst, are William Weld
of Massachusetts, B; Tommy Thompson of Wisconsin, B; John
Engler of Michigan, B; Lawton Chiles of Florida, B; Mario
Cuomo of New York, C; Jim Edgar of Illinois, C; Ann Richards
of Texas, D; and Pete Wilson of California, D.

Introduction

This is the Cato Institute's second Fiscal Policy
Report Card on America's Governors.(1) In it we examine the
taxing and spending records of the governors of 47 states,
34 elected before 1991 and 13 after.(2) The governors' overall grades are given in Tables 1 and 2. Appendix A contains
detailed tables.

Major Findings

Three findings of this study warrant special mention.
First, the economic condition of a state and the fiscal
grade of its governor tend to be closely connected.(3) That
is no coincidence. Virtually all of the states with poor
economic performance in recent years--especially California
and the northeastern states of Connecticut, New Jersey,
Pennsylvania, and Rhode Island--have governors who have
pursued policies of high taxes and spending. Moreover,
studies have shown that states that have raised taxes in the
1990s have suffered deeper and more painful recessions than
the rest of the nation.(4) Tax and spending policies are
important factors in shaping the economic destinies of
states.

Second, party affiliation makes less difference than
some observers might expect. Republicans do score somewhat
better on average. The average grade for Republican governors is C+, versus C- for Democratic governors. Yet it is
noteworthy that, among the pre-1992 governors, Democrats
earned the top three grades and that Democrats, with the
exception of Independent Lowell Weicker, also hold the
bottom five spots.

Finally, although this paper is an analysis of the
governors' performance, the grades assigned also indirectly
reflect the fiscal policy performance of each state's legislature. We found that governors with high grades generally
work with fiscally conservative legislatures. Conversely,
governors with poor grades generally have pro-tax-and-spend
legislatures that are inclined to favor expansive fiscal
policies.

Recent Developments in State Budgets

Table 1
Overall Fiscal Policy Grade--Pre-1992 Governors

Governor

Ranking

Grade

Wilder (VA)

75

A

Romer (CO

72

B

Z. Miller (GA)

71

B

Weld (MA)

69

B

Bayh (IN)

69

B

Engler (MI)

69

B

Sullivan (WY)

69

B

Campbell (SC)

67

B

Thompson (WI)

66

B

Chiles (FL)

66

B

McWherter (TN)

64

C

Schaefer (MD)

64

C

Edgar (IL)

62

C

Branstad (IA)

61

C

Symington (AZ)

61

C

Cuomo (NY)

61

C

Andrus (ID)

60

C

Walters (OK)

59

C

McKernan (ME)

59

C

Carlson (MN)

56

D

Richards (TX)

56

D

Nelson (NE)

56

D

Finney (KS)

55

D

B. Miller (NV)

52

D

King (NM)

51

D

Caperton (WV)

51

D

Voinovich (OH)

50

D

Casey (PA)

50

D

Wilson (CA)

46

D

Roberts (OR)

45

D

Sundlun (RI)

44

D

Waihee (HI)

41

F

Florio (NJ)

37

F

Weicker (CT)

33

F

Table 2
Overal Fiscal Policy Grade--New Governors

Governor

Overall Ranking

Grade

Merrill (NH)

78

A

Fordice (MS)

77

A

Dean (VT)

73

B

Leavitt (UT)

62

C

Jones (KY)

61

C

Edwards (LA)

59

C

Tucker (AR)

56

D

Lowry (WA)

55

D

Carnahan (MO)

54

D

Schafer (ND)

53

D

Racicot (MT)

52

D

Carper (DE)

50

F

Schafer (ND)

48

F

Running a state government is big business these days.
In 1992 the states spent approximately $700 billion, up from
$250 billion in 1980. That comes to about $2,800 per resident and about $150 per $1,000 of state personal income.
The primary job of the nation's governors is to serve as the
fiscal managers of those funds and to pursue budget and tax
policies that will promote prosperity.

The growth of state government has been outpacing the
growth of the private economy in recent decades. For most
of America's history, the states consumed roughly 4 to 5
percent of gross national product. But by 1970 that figure
had grown to 7 percent; by 1980, to 8 percent; and by 1990,
to 8.5 percent. Three budget trends of the 1980s underscore
the unsustainable trend in state government spending:

* State spending and tax revenues climbed at more than
twice the rate of inflation from 1980 to 1990.

* State-government employment outpaced population
growth. In the 1980s the U.S. population grew by 10 percent, but state employment grew by almost 30 percent.

* An American Legislative Exchange Council study shows
that state-government pay grew at a much faster pace than
private-sector pay. For every dollar increase in compensation received by private-sector workers, state-government
workers received $6.30.(5)

Contrary to popular mythology, the states have not
become more fiscally conservative in the 1990s. In the
early 1990s many states faced severe budget deficits. Most
states opted to close their deficits with massive tax hikes.
Both 1990 and 1991 were record tax increase years for many
states--with California, Connecticut, and New Jersey leading
the charge. Those tax increases have not been coupled with
reductions in spending. With few exceptions, state lawmakers have avoided undertaking painful cutbacks in state
spending programs to balance their budgets. In 1991 state
spending rose by 10 percent, and in 1992 it grew by 12
percent. By no definition is that fiscal restraint.

Big spending binges have been most apparent in the
states that have hiked taxes the most. In 1992 spending
rose by 26.0 percent in New Jersey, 12.4 percent in California, 31.4 percent in Pennsylvania, and 14.5 percent in Rhode
Island.

The surge in federal mandates handed down to state and
local governments has contributed to the expansion of state
budgets. (Federal mandates are laws passed by the U.S.
Congress that force states and localities to spend money.)
Federal mandates are the ultimate form of buck passing.
Many state lawmakers complain that federal mandates are a
major reason state budgets are spiraling out of control.
Mandates apply to some of the biggest programs in state
budgets, including Medicaid, Aid to Families with Dependent
Children, roads and highways, and environmental protection.
The ultimate mandated spending program, the state component
of Medicaid, has been growing at between 10 and 15 percent
per year over the past 10 years. Some states complain that
over half of each year's budget is eaten up by spending
mandated by Washington.

Although mandates are increasingly irritating for the
states, it is not true that governors and state legislators
have little remaining discretion to control their state
budgets. Spending on education, for example, is not generally mandated by Washington (although in some cases the
courts have mandated school funding). Moreover, innovative
states can and do find ways to hold down spending, even on
programs that are dictated by Washington. For example,
Michigan, Wisconsin, and several other states have been
granted waivers of the federal rules governing welfare
spending in order to implement cost-saving reforms. States
can curtail Medicaid spending by refusing to cover more than
30 optional services--such as nursing care and chiropractors.

In sum, despite legitimate complaints about the policy
mandates handed down from Capitol Hill, governors and state
legislators do still hold their states' fiscal fate in their
own hands. Some have handled their states' fiscal affairs
much better than others.

Governors as Policy Innovators

Examining the fiscal policies of governors is important
for several reasons. One is the sheer size of the enterprises they control. Today the budgets of California,
Florida, New York, and Texas are larger than those of all
but a few countries. Every state in the country, even
sparsely populated South Dakota and Wyoming, would rank in
the Fortune 500 if it were a business. And state government
is the largest employer in many states. The state of Michigan currently employs more workers than does General Motors.

Another reason to focus on governors' policies is that
the occupants of the state houses are highly influential
political figures in America. Today a governorship is
regarded as a solid stepping stone to the White House. Bill
Clinton, Jimmy Carter, and Ronald Reagan all arrived at the
White House via the state house. Moreover, Republican
governors John Engler of Michigan, William Weld of Massachusetts, Carroll Campbell of South Carolina, Pete Wilson of
California, and Tommy Thompson of Wisconsin are all considered possible presidential or vice presidential candidates
in 1996. So is former Tennessee governor Lamar Alexander.

Governors are also leading public policy innovators.
The states are increasingly fulfilling their roles as incubators for new ideas and as "laboratories of democracy." We
have seen Governors Thompson of Wisconsin and Sullivan of
Wyoming pursue innovative welfare strategies, Governor
Engler of Michigan experiment with market-based school
reforms, Governors Wilder of Virginia and Weld of Massachusetts save tax dollars through privatization, and Governors
Fordice of Mississippi and Symington of Arizona implement
pro-growth supply-side tax cuts.(6)

All too often, however, government activism is regarded
as government success. Governors who are willing to spend
money to solve problems have conventionally been touted as
the best and most effective governors--at least in the
popular press. That was certainly true in the 1980s when
chusetts, Tom Kean of New Jersey, John Sununu of New Hampshire, Bruce Babbitt of Arizona, and Bill Clinton of Arkansas--were all widely praised as bold architects of changes
in economic and social policy.(7) The more tax money those
governors spent, the better was their reputation among
policy experts. Yet the legacy of many of the highly
praised state spending programs of the 1980s is a sea of red
ink in the 1990s.

Willingness to spend tax dollars is no longer viewed as
a positive achievement--especially by the voters. Since
1990, 10 pro-tax governors--both Republicans and Democrats--
have either lost bids for reelection or not sought reelec-
tion because of their low popularity ratings. Jim Florio
was the latest political casualty. In short, the public is
increasingly demanding fiscal restraint from state government.

Purpose of the Fiscal Policy Report Card

Almost all existing ratings of governors are subjective. Typically, ratings are made by political scientists,
other academics, or even other politicians. Those ratings
constitute little more than political popularity contests.
To our knowledge, the Cato Fiscal Policy Report Card on
America's Governors is the only objective system for measuring and comparing the governors' fiscal performance. By
contrast, there are dozens of prominent rating systems for
assessing members of Congress on a whole range of issues--
from their budget and tax policies to their positions on
foreign policy and abortion.

The objective of this report card is to find out which
governors have pursued budget and tax policies that promote
the interests of the taxpayers of their states. Of course,
special-interest groups would no doubt rate the governors
entirely differently. What we measure is the degree of
fiscal restraint exercised by each governor.

Limitations of the Report Card

At the outset, we acknowledge several unavoidable
problems in grading the performance of the governors. The
first, mentioned earlier, is that we do not take direct
account of the influence of the state legislatures.(8) In
most states, the legislature's influence on budget outcomes
is roughly equal to the governor's. However, if the state
legislature is controlled by a party that is different from
the one to which the governor belongs, the governor's influence on fiscal policy outcomes is normally diminished.
(Appendix B contains a summary of the fiscal policy record
of each governor and indicates whether or not the legislature is of the same party as the governor.) There are 12
governors in our survey who have legislatures controlled by
another party.

We find that the dominant party in the legislature does
appear to make an important difference in the performance of
some governors. For example, three of the top-scoring
Democratic governors have worked with Republican legislatures: Bayh (IN), Romer (CO), and Sullivan (WY). The flip
side is also true. Republican governors with poor scores
tend to have Democratic legislatures. Those governors
include most prominently Wilson (CA) and Carlson (MN).

The average governor's grade is C- for states in which
the legislature is controlled by Democrats. It is C- for
states in which control of the legislature is split. And it
is C for states in which Republicans control the legislature.

How to interpret those findings is unclear. It may be
that when a "Republican" state elects a Democratic governor,
that governor tends to be more fiscally conservative than
the typical Democrat. Similarly, when a "Democratic" state
elects a Republican governor, that politician may be predisposed to be more moderate on fiscal issues than the typical
Republican. In other words, it may be that Evan Bayh, for
example, has a fiscally conservative record because the
voters of Indiana are fiscally conservative and would not
tolerate high-tax policies, not because the legislature is
pushing Bayh in that direction. On the other hand, it may
be that the legislature is successfully imposing its fiscal
views on the governor.

Regardless of which explanation is correct, it is
important to emphasize that, with only a few exceptions,
most governors have been granted greater constitutional
authority over the state budget process than has the president over the federal purse strings.(9) For example, more
than 40 governors have line-item-veto authority, a budget
tool the president lacks. Just as it is appropriate to hold
the president at least partially accountable for the fiscal
policies of the federal government, it is appropriate to
hold governors accountable for the fiscal outcomes in their
states.

Another potential complication in this study is that
every state has peculiarities in its expenditure and tax
policies that can make interstate comparisons of taxing and
spending difficult. For instance, in Hawaii most school
funding comes from the state, not the local governments,
which inflates Hawaii's spending figures. Alaska and several northwestern states receive tax revenues from severance
taxes on oil produced or minerals mined in the state. Those
taxes are often paid by out-of-state residents. Furthermore, the fiscal condition of those states can improve or
deteriorate dramatically in response to changes in the
market price of commodities. We believe that severance
taxes are a significant distortion only for Alaska and
therefore exclude that state from the study.

Also, some changes in the states' tax codes may not be
fully accounted for in the rate structures we examine. For
instance, a broadening of the sales tax base is not directly
measured in the tax rates analysis, whereas an increase in
the sales tax rate is. Comparisons of income tax structures
may not fully account for all the manifold deductions and
exemptions that make each state's tax code unique. That is
why we measure changes in both tax rates and tax revenues.
It allows us to detect the fiscal impact of all tax changes.

Methodology

We compute three separate grades for the governors: one
on how well they control spending, one on how well they
restrain taxes, and one on overall fiscal policy. All of
the tax and expenditure data used in this study come from
the U.S. Census Bureau and other nonpartisan sources.(10)

For the 13 governors who took office after July 1991,
official Census Bureau data are not yet available to use in
measuring all of the spending and tax changes that have been
implemented in their first year or years in office. Therefore, we divide the governors into two groups: those who
took office before August 1991 (pre-1992 governors) and
those who have taken office since July 1991 (new governors).
For the 13 new governors, we rely on general fund budget
data and tax rate changes through fiscal 1994, as compiled
by the National Association of State Budget Officers. Those
data do not include all spending and taxes and are less
reliable than the Census Bureau data. They are, however,
the best numbers currently available.

Since the grades for the new governors are based on
their performance after just one or two years in office,
those grades might be likened to "midterm" grades. They
could markedly change depending on the governors' policies
throughout the remainder of their terms. We note that of
the midterm grades assigned in the first Cato Fiscal Policy
Report Card in 1992, 7 have remained the same, 10 have
changed by one grade, and 2 have changed by two grades.

Grading Procedure

For the pre-1992 governors, we examine 14 policy variables, 5 of which are for spending. We standardize the
results for each variable, such that the lowest score is
zero and the highest score is 100. We then assign a weight
to each variable and add the scores achieved in each category.(11) That provides us with separate grades for spending
and for taxes. We combine those scores to obtain an overall
fiscal policy grade for each governor.

The same basic procedures are used for grading the new
governors except that only nine variables are used.

Policy Variables Examined

One objective of our analysis is to compile as comprehensive a picture as possible of the fiscal policy changes
made by each governor. We attempt to do that by examining a
broad spectrum of fiscal policy measures that take account
of economic, demographic, and other factors within each
state. All but two of the variables measure the change
during each governor's tenure. Two of the variables measure
the level of taxes and spending in each state in 1992.

Expenditure Variables for Pre-1992 Governors

The following expenditure variables are used for each
of the pre-1992 governors.

1. Overall level of state spending per family in
1992.(12)

2. Average annual change in real state spending per
family through 1992.

3. Average annual change in state spending per $1,000
of personal income through 1992.

4. Average annual percentage change in real state
spending through 1992.

5. Real change in state general fund expenditures per
family from 1992 to 1994, as recommended by the governor.(13)

Tax and Revenue Variables for Pre-1992 Governors

The following tax rate and revenue variables are used
for each of the pre-1992 governors.

1. Average annual real percentage change in state taxes
through 1992.

2. Average annual change in real state revenues per
family through 1992.(14)

3. Average annual percentage change in state revenues
per $1,000 of personal income through 1992.

4. Revenues from tax changes for fiscal years 1992
through 1994, as a percentage of 1991 general fund revenues.

5. Percentage point change in the state's top marginal
individual and corporate income tax rates through 1994.

6. Change in state personal income tax rate paid by
median-income wage earners through 1994.

7. Sum of the state's top marginal individual and
corporate income tax rates in 1994.

8. Change in the state gasoline tax rate through 1994.

9. Change in the state sales tax rate through 1994.

Expenditure Variables for New Governors

The following three expenditure variables are examined
for each of the 13 new governors.

1. Total 1992 state spending per family.

2. Average annual change in real state general fund
expenditures per family through 1994.

3. Average annual percentage change in real general
fund expenditures through 1994.

Tax and Revenue Variables for New Governors

The following six tax rate and revenue variables are
examined for each of the 13 new governors.

1. Revenues from recommended tax changes as a percentage of state revenues.

2. Average annual percentage change in general fund
revenues through 1994

.

3. Percentage point change in the state's top marginal
individual and corporate income tax rates through 1994.

4. Sum of the state's top marginal individual and
corporate income tax rates in 1994.

5. Change in the state gasoline tax rate through 1994.

6. Change in the state sales tax rate through 1994.

Ratings for the Pre-1992 Governors

Expenditures

A summary of the results and ratings on five expenditure variables is given in Table A-1 in Appendix A. Tables
A-2 through A-6 list the five biggest spenders and the five
biggest budget cutters in each individual spending category.

Two governors distinguished themselves as outstanding
on the spending side of the budget and receive an A: Weld
(MA) and Wilder (VA). Both reduced real government spending
per family in 1992--in Massachusetts the decline was nearly
$400 per family. Sullivan (WY) also has an enviable record
on spending. Real outlays in Wyoming have been cut on an
average annual basis and as a share of personal income
during Sullivan's tenure.

The biggest spenders have been Waihee (HI), Florio
(NJ), and Sundlun (RI). In each of those states real spending rose at a double-digit annual pace in 1992. Moreover,
the average annual increase in spending per family was over
$1,200 in each of those states. Other governors who have
presided over huge spending binges are Wilson (CA) and
Walters (OK). In both California and Oklahoma, spending as
a share of personal income rose by about 11 percent in 1992.

The spending scores highlight major differences in
fiscal strategies for dealing with deficits. In Rhode
Island, Sundlun enacted taxes to close deficits, and spending rose nearly $1,600 per family in 1992. In Massachusetts, taxes have been spurned by governor Weld, and the
strategy of cutting spending has brought it down by almost
$400 per family. Massachusetts is now in better fiscal
health than Rhode Island.

Rhode Island is not the only tax increase state where
spending has exploded. In the other four states with major
tax increases in 1990-91--California, Connecticut, New
Jersey, and Pennsylvania--expenditures also surged. Although those record tax hikes were supposed to be coupled
with budget cutbacks, real annual per capita expenditures
rose by $967 under Wilson (CA), $265 under Weicker (CT),
$1,573 under Florio (NJ), and $636 under Casey (PA). The
promised spending cuts have materialized slowly, if at all.

Tax Rates and Revenues

Tables A-7 through A-16 present the results for the
pre-1992 governors on tax rates and revenues. The champion
tax cutter in recent years has been Symington (AZ), who
received an A for his performance on tax rates and revenues.
The tax burden on families has been reduced during Symington's term in Arizona, and revenues have fallen both in real
terms and as a share of personal income. Symington has cut
income taxes and held the line on all other major taxes.
Governors Wilder (VA), Engler (MI), Romer (CO), and Sullivan
(WY) have also done a superior job of holding the line on
taxes. In late 1993 Engler enacted a multi-billion-dollar
reduction in the state and local property taxes. That
reduction is too recent to have been included in the tax
statistics for Engler in this report.

The biggest tax hikers have been Weicker (CT) and
Roberts (OR), both of whom received an F in the tax category. The tax burden rose by nearly $2,000 per family in
Connecticut under Weicker and by nearly $1,750 per family in
Oregon under Roberts in 1992. Taxes rose 20 percent as a
share of personal income in both those states.

Three governors have brought down income tax rates
substantially: Cuomo (NY), Romer (CO), and Branstad (IA).
Those tax rate reductions have actually led to an increase
in income tax revenue collections in those states. Meanwhile, the largest tax rate increases have been enacted
under Casey (PA), Sundlun (RI), Florio (NJ), Finney (KS),
Weicker (CT), and Wilson (CA). Virtually all of those
states have suffered a much more severe recession than their
neighbors.(15) Wilson's tax increase has produced only a
fraction of the revenue expected.(16)

Ratings for the New Governors

Thirteen states have governors who took office after
July 1991.(17) The fiscal policy track records of those governors is much more limited than those of the pre-1992
governors. Census Bureau expenditure and tax data are not
yet available to measure the performance of the new governors. We are limited to two years' data for Governors Jones
(KY), Edwards (LA), Fordice (MS), and Dean (VT) and just one
fiscal year's data for the other nine. We rely mostly on
general fund expenditure data and enacted changes in deriving midterm grades for the new governors.

The results for each of the three spending categories
we investigated for the new governors are shown in Tables
A-17 through A-20. The two governors with the best records
for cutting the budget are Fordice (MS) and Schafer (ND).
They have cut general fund spending both in real terms and
on a per family basis.

Hunt (NC) and Carper (DE) have shown a strong proclivity for higher spending in their first budgets. Last year,
real general fund spending was hiked by $316 per family in
North Carolina and by $144 per family in Delaware.

Tax Rates and Revenues

The results for the new governors in the revenues and
tax rates categories are given in Tables A-21 through A-27.
The new governor with by far the best record on taxes is
Merrill (NH). He has recommended tax reductions equal to
about 0.5 percent of total general fund revenues at a time
when most governors have been recommending tax hikes. Dean
(VT) also deserves credit for approving an income tax rate
reduction, as does Fordice (MS) for vetoing an increase in
the state sales tax--a veto that was subsequently overridden
by the legislature.

On the other end of the scale, Racicot (MT) and Schafer
(ND) earned F's for their tax policies. Racicot has tried
to raise virtually every tax the state levies and has requested an enormous 21 percent increase in taxes in his
first year. He raised the gas tax and approved a new 4
percent sales tax, which voters quashed overwhelmingly in a
referendum. Schafer and Carnahan (MO), who received a D on
taxes, approved large increases in their states' income
taxes.

Overall, the fiscal record of the new governors has
been uninspiring, with far more showing a willingness to
raise taxes than to cut them.

Conclusion

As has been the case on the federal level, the 1990s
have been years of significant fiscal expansion for the
states. The major lesson of the 1990s so far is that governors who try to combat budget deficits with major tax increases harm their states' economies and have very little
success in slowing the tide of red ink. California, Connecticut, New Jersey, Rhode Island, and Pennsylvania all
bear unhappy witness to the fiscal and economic consequences
of raising state taxes.

For the first time in many years, the fiscal outlook
for the states is rosy. Many states will have the luxury of
a budget surplus in 1994. Several governors, including
Cuomo, Engler, Fordice, King, Symington, Weld, Wilson, and
newly elected New Jersey governor Christine Todd Whitman
have proposed major tax cuts this year. That is precisely
the proper fiscal strategy for state governments to pursue
after several years of budget hemorrhaging in state capitals. Governors who refuse to cut taxes this year will see
their states fall further behind in the competition for
investment, new business creation, and jobs.

(2) Three governors are not included in this report. Walter
Hickel of Alaska is excluded because of peculiarities in
Alaska's budget system that make interstate comparisons
problematic. Jim Folsom of Alabama is excluded because he
did not become governor until April 1993, when the previous
governor, Guy Hunt, was indicted. Walter Miller of South
Dakota also did not become governor until April 1993, when
George Mickelson was killed in a plane crash. We do not yet
have sufficient information on the fiscal policies of Gover
nors Folsom and Miller.

(3) Several of the variables used reflect the growth of
spending and taxes relative to the growth of personal income
in the states. Governors who have presided over periods of
rapid growth in state personal income have better grades,
other things being equal, than governors whose tenure has
corresponded with declines in state personal income.

(7) For instance, in the 1980s the left-leaning New York-
based Corporation for Economic Development published several
ratings of the states to determine which governors were
implementing the best economic policies. Massachusetts and
Michael Dukakis routinely ranked at the top of the rating
scale, until the fiscal collapse of Massachusetts in 1989.

(8) We use fiscal year 1994 figures from the governors'
recommendations rather than the amounts appropriated by the
legislatures.

(9) In the South the state constitutions tend to confer
fewer powers on the governors than is typical in the rest of
the nation. The southern states have typically followed
what is sometimes called the "weak executive model." The
weakest governor in the nation is the governor of North
Carolina, who does not have veto authority of any kind.

(10) For the pre-1992 governors, unless otherwise noted, the
U.S. Census Bureau is the source of all the data presented
on state spending, state taxes, state population, and state
personal income. The U.S. Census Bureau monitors state
government finances each year and publishes a detailed
report of its findings entitled "State Government Finances."
The census data on state governments is superior to data
from all other sources because they account for every type
of outlay and every type of revenue generated for each
state. The most recently published data are for 1992.

The data on general fund expenditures and general fund
tax revenues come from biannual compilations by the National
Association of State Budget Officers published in "Fiscal
Survey of the States"; and from Tax Foundation, State Tax
Rates and Collections in 1993, Special Report no. 27 (Wash
ington: Tax Foundation, January 1994).

The data on changes in tax rates come from several
sources: the Advisory Commission on Intergovernmental Rela
tions, "Significant Features of Fiscal Federalism," various
years; the National Conference of State Legislatures, "State
Tax Actions," various years; and statistics obtained direct
ly from the finance and tax offices of the individual
states.

(11) All spending and revenue variables have a weight of 1.
The tax rate variables are assigned lower weights, as ex
plained in the notes to Tables A-7 and A-21.

(12) Throughout this report "family" means a family of four.

(13) This last spending measure captures the effect of spending decisions that have been made in the last two years in
the states but are not yet compiled by the Census Bureau.
For this measure we use annual data compiled by the National
Association of State Budget Officers. The 1994 fiscal year
estimates are based on the levels recommended by the gover
nors during last year's budget cycle. General fund data are
far from ideal for measuring total spending growth in a
state. General fund spending does not include certain types
of nonappropriated spending, such as pension fund spending
and some entitlement outlays. Furthermore, state lawmakers
sometimes move spending into or out of the general fund to
mask fiscal problems. Despite those defects, the general
fund data do, for the most part, provide us with a fairly
good picture of how the states' spending patterns have
changed since 1992. The 1992-93 growth rates were used in
estimating the 1994 population.

(14) All state revenues in this report exclude intergovern
mental funds from the federal government.

(16) Although tax increases are often viewed as fiscally
responsible, recent evidence indicates that states' bond
ratings generally fall after taxes are raised and rise after
taxes are cut. In other words, raising taxes hurts the
fiscal condition of a state. See Victor A. Canto, Christo
pher Charles, and Arthur B. Laffer, "The Determinants and
Consequences of State General Obligation Bond Rating
Changes," Laffer, Canto & Associates, La Jola, Calif., 1991.

(17) Lt. Gov. Jim Guy Tucker of Arkansas took over the gover
norship when Bill Clinton was elected president in 1992.

Published by the Cato Institute, Policy Analysis is a
regular series evaluating government policies and offering proposals for reform. Nothing in Policy Analysis
should be construed as necessarily reflecting the views
of the Cato Institute or as an attempt to aid or hinder the
passage of any bill before Congress.

Elected in 1990 as a self-described "Reagan Republican"
with an agenda of cutting taxes and state spending, Symington has delivered on half his promise. In his first two
years, Symington has shunned all tax increases and even
enacted two small tax cuts--at a time when most governors
have been raising taxes. Thanks to a small budget surplus
in 1993, Symington has promised more income tax cuts in
1994. However, Arizona's spending continues to spiral out
of control. (Arizona had the fastest growing state budget
in the nation in the 1980s.) In Symington's first fiscal
year, 1992, the state budget grew by 12 percent. The one
positive sign is that since then general fund expenditures
have declined slightly.

Tucker was elevated to the governorship after Bill
Clinton's election to the presidency. So far Tucker has
continued Clinton's 10-year state budget and tax build-up.
To address a Medicaid funding gap, upon his swearing-in
Tucker called a special session of the legislature that
resulted in an almost $80-million increase in state revenue.
Among the tax hikes were an increase of 12.5 cents in the
cigarette tax, a new soft drink excise tax of 2 cents per 12
ounces or the equivalent, an expansion of the sales tax to
various services, new taxes on health care providers, a new
gross receipts tax on bingo, and an increase in the real
estate transfer tax. Taxes and spending both rose by 4
percent above inflation in his first budget.

Pete Wilson's fiscal stewardship has been hard on
California. In 1991 Wilson rammed through the legislature a
$7-billion tax increase--the largest state tax hike in
American history. It has contributed to the outmigration of
people, businesses, and an estimated half million jobs. In
three years Wilson has raised virtually every state tax
imaginable: the income tax, the sales tax, the gasoline tax,
the cigarette tax, and a host of others. Yet only a frac-
tion of the projected revenues has been delivered, and thus
big budget deficits remain. Tax collections actually fell
in 1992, an indication that California's new 11 percent
income tax rate is losing money for the state. Every dollar
raised in taxes in 1991 was supposed to have been linked
with $2 of spending cuts. In Wilson's first year alone, the
state budget increased by 10 percent, or $9 billion or
almost $1,000 per family--after inflation. The one bright
spot in the fiscal outlook is that last year Wilson finally
requested and won sharp cutbacks in the state's $100-billion
budget.

During Romer's tenure as governor, Colorado has done an
enviable job of keeping the lid on spending and taxes. Some
of that solid performance is attributable to a fiscally
conservative legislature and an even more fiscally conservative electorate, which recently passed a referendum requiring voter approval of state and local tax increases. Expenditures have been growing at a real rate of 2 percent per
year--much lower than the budget growth in most states. By
far the most important fiscal achievement of Romer's governorship came in his first term when the state's progressive
corporate and personal income tax rates, which topped out at
8 percent, were converted to a flat, simplified 5 percent
rate. However, of late Romer has been acting like a traditional tax-and-spend liberal. He lobbied against the ballot
measure requiring voter approval of tax increases and for
his own initiative to raise the sales tax to pay for more
spending on education. Fortunately, the voters ignored his
advice on both measures.

Weicker is the champion tax-and-spend governor--edging
out New Jersey's Jim Florio. After a decade during which
Connecticut's budget increased by 150 percent, Weicker's
solution to the resulting red ink in 1991 was to enact a
massive tax hike. Despite roughly two-thirds public opposition to the concept, Weicker won narrow support in the
legislature for the state's first personal income tax in
exchange for a decline in the state sales tax. For the
average Connecticut taxpayer, that was a bad deal: the real
tax burden climbed by $2,000 per family, and annual state
revenues went up by 20 percent after inflation. Over roughly the same time period, 1989-92, real income per family in
Connecticut dropped by almost $2,500 and jobs disappeared.
There has been no fiscal restraint on the expenditure side
of the budget; real expenditures have climbed by more than
$200 per family per year.

Delaware

Tom Carper, Democrat Legislature: Divided
Took Office: 1/93
Grade: F

After serving five terms in the U.S. House of Representatives, Carper won a landslide election to the governorship
in 1992. As governor, he has shown about as much fiscal
restraint as one might expect of a 10-year veteran of the
U.S. Congress. Carper has followed closely in the footsteps
of his Republican predecessor, Michael Castle, by increasing
spending on health care, education, and economic development. He has sought to extend access to health care to all
children and provide early childhood education. To pay for
all of that, Carper increased Delaware's gasoline tax by 3
cents per gallon, hiked turnpike tolls from $1.00 to $1.25,
and raised the motor vehicle document fee. If Carper truly
wants to promote economic development in Delaware, he should
imitate the policies of another former Republican governor,
Pete DuPont, who cut tax rates and presided over a lengthy
period of prosperity in Delaware.

Chiles took office in 1991 pledging to reinvent state
government and "right-size" the bureaucracy, but so far he
has devoted most of his attentions to raising taxes. In
1992 Chiles introduced his "investment budget," which called
for $1.4 billion in new taxes, including an expansion of the
sales tax to utilities and various personal services and an
increase in taxes on businesses. Chile's relatively good
grade here is to some extent a reflection of the fact that
all his attempts to enact tax hikes have been stymied by the
legislature and a skeptical public. Florida's expenditures
have been growing at about an average pace (5 percent per
year) during his term. But because Florida remains a low-
taxing-and-spending state, its economy continues to perform
fairly well under Chiles.

Miller's fiscal performance has been above average in
almost all spending and taxing categories. He has not
raised any major new taxes, and the tax burden in Georgia
actually fell by about $150 per family in 1992. Miller did,
however, throw his support behind a new state lottery, to
pay for more spending on education. Although Georgia remains one of the South's highest spending states, Miller
held the growth of spending to less than 3 percent in 1992.
He has also cut the state-government payroll by 5,000 workers. The only disturbing development is that general fund
spending approved last year included substantial spending
hikes for fiscal 1994.

Waihee has helped to create and prolong the recession
in Hawaii by his spendthrift budget policies. In his first
five years, he allowed the state budget to mushroom from
$3.2 billion to $5.3 billion--an average annual increase of
10 percent. That amounts to about $1,200 per family every
year. Since then, spending has continued to rise at a rate
well above the U.S. average. Waihee has pumped funds into
an expensive new universal health care program--which
threatens to bankrupt the state--new low-income housing
projects, education, and "economic development." Despite
all of those "pro-growth" spending initiatives, the unemployment rate in Hawaii has increased by 2 percentage points
since 1989, and property values are in a depression. The
spending path charted under Waihee is clearly unsustainable--both fiscally and economically.

Andrus has a pro-tax, pro-spending bias that seems out
of step with historically fiscally conservative Idaho. He
has raised corporate taxes, gasoline taxes, and other fees.
Tax receipts have been accelerating at 6 percent per year
above inflation. Andrus has used that money to expand the
state budget by more than one-third, after inflation, since
1987. Much of the money has been channeled into the
schools, children's programs, and the environment. Idaho is
losing its distinction as a low-tax state under Andrus's
leadership.

Illinois

Jim Edgar, Republican Legislature: Divided
Took Office: 1/91
Grade: C

The Republican party apparatus in Illinois has long
been ruled by moderates, and Edgar is the prototypical
Illinois GOP politician. He has not raised major taxes, but
he made permanent an anti-growth state income tax increase
(enacted by his predecessor Republican Jim Thompson) that
was supposed to have been temporary. Although Edgar promotes himself as an anti-spending crusader and talks of
aggressively downsizing state bureaucracy, during his first
year, the Illinois budget grew by more than $1 billion, or
almost 6 percent. Over the past year, however, Edgar's
performance has finally started to match his budget-hawk
rhetoric. In 1993 and 1994 the budget will grow by only
about 1 percent per year after inflation. Edgar falls in
the middle of our ranking of governors.

Indiana

Evan Bayh, Democrat Legislature: Divided
Took Office: 1/89
Grade: B

Bayh has an admirable overall fiscal and economic
record as governor of Indiana since 1989. Indiana has been
one of the top states in job creation in the 1990s, and its
unemployment rate has declined significantly relative to the
national average. Bayh has been conspicuous among governors
in firmly keeping his promise not to raise any major taxes.
By 1992 the tax burden had declined by about $300 per family. His record on spending is not as solid; expenditures
climbed by 4 percent per year above inflation, with more
money poured into education, health care, and children's
programs. Still, on balance, his performance is better than
that of most governors.

As one of the two governors with the longest tenures
(the other is Mario Cuomo), Branstad has had a tough task
doing battle year in and year out with a notoriously pro-big-government legislature. His major successes came in his
first term when he cut business taxes and personal income
tax rates. But the state still has one of the 10 highest
top marginal income tax rates in the country at 10 percent.
Branstad hurt himself severely by not vetoing an unpopular
sales tax rate hike and base-broadening measure in 1992, the
same year he gave state employees an 8 percent raise.
Overall, Branstad's budget numbers are a bit better than
average. He has held real spending and revenue growth to
about 2.5 percent per year for almost 10 years. His tax
cuts and fiscal restraint have made Iowa one of the fastest
growing states since the mid-1980s.

Although Finney was elected as a fiscally conservative,
anti-tax Democrat, her performance has been somewhat disappointing. In her second year in office, she agreed to major
income tax increases, a sales tax hike, and a gasoline tax
increase. Expenditures rose about 4 percent after inflation
in her first year, and the general fund has grown by 9
percent per year since then. Kansas voters have dumped
their last two governors (Democrat John Carlin and Republican Mike Hayden) for raising taxes; Finney may be the third
in a row to be ousted.

Jones, a former Republican state legislator in West
Virginia, won a lopsided gubernatorial race in 1991 by
promising to promote economic development in Kentucky. His
major development initiative has been the expansion of a
corporate tax abatement program that provides tax relief for
new businesses locating in the state. (In some cases the
state pays half of new businesses' rent for up to 10 years
and reimburses them for up to half of their start-up costs.)
But there is much on Jones's agenda that will hurt business
formation, including an increase in the corporate tax rate
and a proposed new universal health care program. For the
most part, Jones has shown moderate fiscal restraint on
spending issues, with outlays rising only slightly higher
than inflation. Halfway through his term (he is ineligible
for reelection), Jones seems destined to leave behind a
mediocre fiscal record.

In his long career in politics, Edwards did the public
his greatest service in 1991 when he bested ex-Klansman
David Duke for the governorship of Louisiana. Elected to
three previous four-year terms as governor in 1971, 1975,
and 1983, he was chased from office in 1987 under indictment
for bribery, of which he was later acquitted. In 1992
Edwards cut spending and held the line on taxes. But in his
budget for fiscal year 1994, he reversed course and pushed a
$480-million tax hike, including a new state property tax.
A charitable assessment of the fiscal record of his fourth
term is that it has been average.

McKernan has been governor during the best of times and
the worst of times for Maine. During the good economic
times that lasted through 1989, the state treasury was flush
with revenues and McKernan used those riches for tax rebates
and generous spending hikes. From 1987 through 1992,
Maine's expenditures increased by 6 percent per year, or
approximate $2,500 per family over the period. When the
bottom fell out of the economy in the Northeast, Maine's
unemployment rate skyrocketed by 3.5 percentage points, and
the budget surpluses quickly turned to a pool of red ink.
McKernan initially responded to the budget crisis by agreeing to "temporary" increases in the sales and income taxes.
Those temporary tax hikes remain in effect today. From 1989
to 1993 Maine had the fifth largest tax increase in the
nation, which hindered its economic recovery. Fortunately,
McKernan has finally forced the Democratic legislature to
take the knife to the budget. General fund spending has
been reduced by nearly $200 million since 1992. For liberal
Maine, McKernan may be as fiscally conservative as a governor can be.

Schaefer may have made the biggest mistake of his 40
years in public office two years ago when he rammed a major
tax increase through the state legislature. That tax hike
included higher income tax rates on the rich, a gas tax
increase, an expanded sales tax, and a doubling of the
cigarette tax. The tax bill propelled Maryland, which
already collected $500 more per resident in tax revenues
than the average state, even higher into the ranks of America's most taxing states. As so often happens, the tax rate
increases have failed to translate into increases in tax
revenue. Hence, chronic budget deficits remain. Schaefer
has failed to support even modest restraint in spending.
The Maryland budget grew at an annual pace of almost 4
percent above inflation between 1987 and 1992--notwithstanding Schaefer's assurances of belt-tightening in Annapolis.
Overall, Schaefer's fiscal performance has been less than
inspiring.

Weld has demolished the myth that it is politically
impossible to cut government spending. Except for a brief
"sophomore slump," Weld has a stunningly successful fiscal
record in Massachusetts. His supply-side fiscal conservatism has reversed a decade of uninterrupted budget growth
during the "Massachusetts Miracle" years under predecessor
Michael Dukakis. Inheriting a $1-billion deficit, Weld
balanced the budget in his first year by slashing state
expenditures by $600 million--a 3 percent real cut--by
shunning all new taxes, and by repealing a sales tax on
services that had been enacted in December 1990. Since then
the budget has grown by a modest 2 percent per year, with
most of that growth occurring in his slump year, fiscal
1993, when he increased funding for "investment" and envi-
ronmental programs. In addition to balancing what had been
perceived as a hopelessly imbalanced budget, Weld has had
several other noteworthy triumphs. He has cut taxes five
times, slowed the growth of Medicaid and welfare spending,
proposed eliminating the state tax on long-term capital
gains, and engineered a triple up-grade in the state's bond
rating in just three years. His latest bombshell was a
pronouncement that he will seek a $300-million income tax
cut to offset the impact of President Clinton's federal
income tax increase. Weld is on the way to creating a
genuine Massachusetts miracle.

Engler has helped to catapult Michigan, once derided as
the rust-belt state, into one of the fastest growing states
in the union. Last year Michigan's unemployment rate fell
below the national average for the first time in 25 years.
Engler's growth-oriented fiscal policies are in part responsible for that impressive economic performance. Engler has
held state spending growth to just above the inflation rate
in his first three years. He has cut the state workforce by
4,000 workers; eliminated an entire department; and cut
spending on the arts, commerce, and labor in half. Engler
gained national attention for eliminating the state's general assistance welfare program for some 80,000 employable
adults--thus disproving the mythical iron rule of politics
that entitlements cannot be eliminated. The only blemish on
his record has been an increase in school funding over the
past three years. But Engler's latest crusade is to sharply
cut sky-high property taxes that fund the schools, while
demanding greater parental choice in education. Engler's
unique blend of policy innovation and fiscal conservatism
has been positive for Michigan.

Carlson came to the governor's mansion with a reputation as a moderate Republican, not as a dedicated budget
cutter. So far, he has lived up to that reputation. In his
first three years, spending in real terms has grown at a
respectable rate of less than 3 percent per year. Carlson
deserves credit for holding the Democratic legislature to
that moderate spending level. But he has created several
new spending programs, including a universal health care
program called HealthRight, which will cost state taxpayers
at least $250 million a year. On the tax side, he has fared
worse. The income tax and sales tax have been raised, and
tax revenues climbed by $650 per family in his first year
alone. Overall, Carlson's fiscal performance has been
slightly below average in most categories.

Fordice is Mississippi's first Republican governor in
115 years. A self-made businessman, he has pursued an
unapologetic pro-business, pro-jobs agenda. Fordice has
stuck to his guns and refused to consider any tax hikes;
instead, he trimmed the budget by nearly 5 percent during
his first two years in office. In 1992 the Democrat-controlled legislature passed a 1 cent increase in the state
sales tax--overriding Fordice's veto. Because of Fordice's
tightfistedness, the budget is now running a surplus that
Fordice wants to erase by cutting income taxes. His policies have been a spectacular economic success. In 1993 U.S.
News & World Report ranked Mississippi first in economic
performance coming out of the recession.

Democratic lieutenant governor Mel Carnahan soundly
defeated state attorney general William Webster for the
governorship in 1992. Carnahan campaigned on the promise of
a tax increase for education--to reduce class size, expand
merit pay, and reorganize higher education--and to establish
a Missouri Research Alliance to assist business growth.
Unfortunately for Missouri taxpayers and businesses, he has
kept his promises. His first-year budget included a 5.3
percent real increase in spending. The legislature added
yet another $119 million to that figure, which means that
spending will rise by 7 or 8 percent. Furthermore, the
corporate income tax rate was raised from 5 to 6.25 percent,
and the federal income tax deduction from both the state
personal income tax and the state corporate income tax was
sharply reduced.

Racicot has one of the most pro-government, pro-tax
philosophies of any governor of either party. His first
initiative as governor was to push for a new 4 percent sales
tax (Montana does not have one)--an idea the voters soundly
defeated when it appeared on the ballot last year. The
fallback measure approved by the legislature and Racicot was
an income tax increase. An avalanche of public opposition
to the increased income tax has forced a voter referendum on
the issue in November 1994. In the meantime, Racicot has
doubled the state payroll tax, raised the state gas tax 7
cents a gallon, and increased dozens of fees and assessments. Racicot's latest brainstorm is a government-run
universal health care program for Montana. In his first
year in office, Racicot came up with a seemingly endless
stream of bad ideas for Montana.

Nelson is the third straight Nebraska Democrat to win
the governorship by ousting a pro-tax Republican. He relentlessly attacked incumbent Kay Orr for breaking a no-new-
taxes pledge. But once he gained office, Nelson raised
taxes several times himself. Both the top marginal corporate and personal income tax rates have been raised, although Nebraskans did see a small reduction in the gasoline
tax. In Nelson's first year in office, real state expenditures grew by nearly 8 percent, but since then spending has
been held to roughly the inflation rate. Nebraska currently
ranks 40th among the states in tax burden and spending, but
in recent years it has been moving toward the middle. That
is not going to bring jobs and families back to a state that
has been losing both.

The Nevada economy has been surging over the past
several years--thanks in no small part to the exodus of
businesses and jobs from high-tax neighbor California and
the fact that Nevada has no personal or corporate income
tax. Unfortunately, Nevada's budget has surged forward even
faster than the economy and population growth. In Miller's
first full three years in office (1989-92), the state budget
grew by more than 10 percent per year above inflation. Real
spending per family grew by $1,200 in those years. To help
finance that enormous spending build-up, Miller raised the
sales tax, the gas tax, and the cigarette tax. After a
miserable start, Miller's budget performance is slowly
improving. Since 1992 spending has fallen below the inflation rate and Miller is insisting on no new taxes. If
Nevada's spectacular economic boom is to continue, the state
needs to follow Miller's new policies.

New Hampshire has the lowest per capita state tax
burden, no personal income tax, and no state sales tax.
Residents want it to stay that way. Since 1972 every governor and state legislator has taken a pledge not to vote for
a sales tax or an income tax. In 1992 Merrill trounced his
Democratic opponent Deborah Arnesen, who refused to take
"the pledge." During his first full year in office, Merrill
held the line on taxes and made real cuts in state spending.
Cutting the size of government in a state that already has
the lowest tax burden in America is an impressive accomplishment indeed. Merrill's policies have helped New Hampshire crawl out of the recession in stronger economic shape
than most of its neighbors. Jobs are finally reappearing,
and the half-decade-long budget crisis is finally over.

Florio's just-completed four-year term as governor was
a period of severe economic decline and fiscal deterioration
for New Jersey. After winning a landslide election by
pledging no new taxes, Florio immediately rammed through the
legislature a "soak the rich" $2.8-billion tax hike to
provide a massive infusion of funds to the inner-city
schools. The economy immediately sank deeper into recession, business bankruptcies increased by 150 percent,
300,000 jobs were lost, and the unemployment rate rocketed
to 9.1 percent--the highest in the nation. Florio contended
that his tax hike was an unavoidable dose of bitter medicine
to balance the budget. The truth is that Florio was among
the three biggest spending governors in the nation. In 1991
the budget in nominal terms grew by 8.4 percent; that increase was followed by a 1992 budget expansion of 26.1 percent (the third largest in the nation). In his first two
years the budget grew by more than $3,000 per family.
Florio's woeful fiscal record would be worse, except that
after the Democrats were swept from the legislature in the
1991 midterm elections, the newly elected legislators enacted spending and tax cuts over Florio vetoes. From start to
finish, Florio's new-age progressive populism was an enormous bust for New Jersey.

New Mexico ranks among the top five states in virtually
all spending and tax categories. It spends about $1,500
more per family than the average state; it has roughly twice
as many state employees as a share of the population; and
its tax burden is the highest among the 48 contiguous
states. Under King the disparities have widened. From 1980
to 1992 the New Mexico budget grew by 67 percent, and the
welfare budget alone rose 150 percent above inflation--King
was governor during roughly half of those years. (This is
King's third stint in the governor's mansion; New Mexico
does not allow governors to serve consecutive terms.) His
performance in recent years has been especially poor. In
1992 King allowed spending to climb by more than $535 per
family. Last year he raised the gas tax by 6 cents per
gallon, a 38 percent increase. As Forbes recently summarized the fiscal situation in New Mexico under Governor
King, "Until the politicians understand that states don't
attract capital with high taxes and red tape, you'd want to
think twice before starting or expanding a business here."

In many ways Cuomo has governed as an old-school north-eastern liberal Democrat. He seemingly never met a spending
program he didn't like. During his three terms Cuomo has
approved enormous budget increases for education, transportation, social services, AIDs, the homeless, and children's
programs. In 10 years Cuomo took the New York budget from
less than $50 billion to $75 billion--a 55 percent real
increase. New York spends $6,000 more per family today than
it did when Cuomo was first inaugurated in 1983. Thanks to
spending excesses, New York is now saddled with what the New
York Times calls "a rotten credit rating, the worst among
the 50 states." But the complicating feature of Cuomo's
record is that his tax policies have been supply side. He
chopped the top tax rate in the state from 14 percent to 8
percent--a policy that generated strong economic growth for
New York in the 1980s and thus produced a revenue windfall,
which Cuomo eagerly spent. Cuomo has also held the line on
the sales and gas tax for 10 years. As he prepares for his
fourth election bid, he is now talking about cuts in business taxes to spur an economy that has lost some half million jobs in the 1990s. The big question is whether New
York would be getting Cuomo the tax cutter or Cuomo the
free-wheeling big spender.

Hunt's third term as governor (he served from 1976 to
1984) has been anything but a charm for North Carolina. He
came to office promoting big-government ideas--including
school-based apprenticeship programs, increased spending on
day care, and more money for the schools--and so far he has
been successful at implementing them. His first-year budget
contained a recommended 8.7 percent real increase in spending, far above the increase that was legislated in most
states for 1994. Hunt's pro-spending philosophy threatens
to disrupt a decade of strong economic performance in North
Carolina.

While sending Schafer to the governor's mansion, North
Dakotans also defeated a proposed one-half cent sales tax
hike. Schafer did not get the voters' anti-tax message. In
his first year North Dakota raised its income tax (because
the state piggybacks on the federal rates, which were raised
by Bill Clinton), the gas tax, the state's tax on charitable
gaming tickets, and the cigarette tax (from 29 cents a pack
to 44 cents). To his credit, however, Schafer has pushed
through significant cuts in state spending. In 1994 state
general fund outlays will grow more slowly than inflation.

Voinovich campaigned for governor as a fiscal conservative. Unfortunately, he has not governed that way. In his
second year in office he pushed through a $1-billion tax
hike. That package added a new top bracket for the personal
income tax; expanded the sales tax base; increased taxes on
gas, cigarettes, and alcoholic beverages; and imposed several new taxes, including a bed tax on nursing homes, a tax on
soft drinks, and several environmental taxes. Despite
Voinovich's encouraging talk about streamlining government,
state expenditures rose by nearly $2 billion--$580 per
family--in his first year. Since then spending and revenue
growth have slowed, but both are still climbing ahead of the
inflation rate. During Voinovich's tenure, Ohio has lost
35,000 manufacturing jobs, and it now ranks 36th in employment growth. On the positive side of the ledger, Voinovich
has overhauled the state's costly workmen's compensation
system and has recently launched a new program of corporate
tax credits for new investment. Nevertheless, overall,
Voinovich's fiscal performance has been a disappointment.

Walters's term as governor have been dominated by continuous allegations that he ran afoul of campaign finance
laws during the 1990 governor's race. He recently pleaded
guilty to a misdemeanor. Amidst all the turmoil, Walters's
fiscal record has been overlooked. It has been a mixed bag.
In 1992 he increased spending by 9 percent, primarily to
pump more money into the schools. But he has held the line
on taxes--thanks in part to passage of a recent ballot
initiative that requires a three-fourths vote of the legislature or a vote of the people to raise taxes. In 1993 he
called for and won an across-the-board cut in spending on
the entire budget, except education. The economy is on the
rebound with a big surge in new business incorporations and
a below-average unemployment rate, despite the depression in
the oil industry. At least on fiscal and economic issues,
Walters has not been the villain that the press has made him
out to be.

Roberts describes herself as an old-school liberal
Democrat. But even in liberal-leaning Oregon, she may be
too far to the left for the average citizen. She has spent
her first three years barnstorming the state unsuccessfully
for one major new tax after another. She made it a personal
crusade to overturn the state's 1990, 30 percent, property
tax reduction referendum measure. The voters rejected that
effort. She lobbied for instituting a state sales tax, but
the measure was defeated on the ballot by a three-to-one
margin. Meanwhile, the Oregon budget has exploded. Roberts's cries that the state was being depleted of revenues
were greeted with universal scorn after her first-year
budget saw state revenues surge by a nation-leading 22
percent--or $1,700 per family. In spite of her claims that
spending had been tightly restrained by tax caps, she somehow found the money to raise spending by $500 per family in
1992. Also in 1992 Roberts narrowly eluded a recall petition, inspired in no small part by her abysmal fiscal
record.

Both taxes and government spending have been steadily
on the rise during Casey's tenure. During his first five
years, the state budget roughly doubled. Adjusting for
inflation, that amounts to more than $3,000 per family. In
1991 Casey joined the tax hike bandwagon and won passage of
a $2-billion personal and corporate income tax increase,
which raised the rates and added a surtax to each. (The
surtax on personal income expired as scheduled.) The
state's economy still has not recovered. Pennsylvania has
lost nearly 100,000 manufacturing jobs since 1989; its
unemployment rate has risen by almost 3 percentage points;
and it has been one of the slowest states to come out of the
1991-92 recession. All that adds up to a below-average
economic and fiscal record for Casey.

No state was hit harder by the recent recession in the
Northeast than Rhode Island. Sundlun took over the governorship in the midst of the downturn, inheriting a banking,
real estate, and budget deficit crisis. He has not handled
those crises well. In his first year he passed a disastrous
tax hike--including higher income, business, and gasoline
taxes. Unfortunately, the higher tax rates only produced a
trickle of revenue, as the economy worsened. Meanwhile,
Sundlun's efforts to control a decade-long budget build-up
proved woefully inadequate. In 1992 the budget grew by 11
percent in real terms, or $1,500 per family. Fortunately,
since 1992 Sundlun has begun to make some genuinely deep
cuts in spending and bureaucracy. His fiscal record has,
nevertheless, been a case study in how not to manage a
budget crisis.

Campbell calls himself a fiscal conservative, and on
balance his record lives up to that billing. In an era when
most states have been raising taxes, Campbell has been
cutting them. He has trimmed the corporate tax rate, the
capital gains tax, and commercial property taxes, while
holding the line on the personal income and sales taxes.
The result: taxes as a share of income have fallen in South
Carolina. Moreover, new business investment has grown by
some $18 billion since 1987, with BMW scheduling a new plant
opening. The South Carolina economy has done surprisingly
well despite big declines in defense contracts and the
textile industry. Campbell's major deficiency has been a
penchant for accommodating special-interest groups on the
spending side of the ledger. He talks of the government
"doing more with less," but during his tenure government has
mostly done more with more. Between 1987 and 1992 real
spending sped ahead at 5 percent per year. That all adds up
to a good fiscal record, but by no means a great one.

McWherter is barred from running for a third term this
year, and that may be a major blessing for Tennessee, given
his budget and tax policies. In 1992 McWherter lobbied
tirelessly for a state income tax--Tennessee is one of nine
states without one. He wanted the funds to spend on the
state schools and teachers. The legislature defeated the
income tax, so McWherter settled on a half-cent sales tax
hike, expansion of the sales tax to health care services,
and a 4 cent per gallon gasoline tax increase instead. From
1987 to 1992 state spending accelerated at a real rate of 5
percent per year under McWherter. Spending per family
increased $1,500. Since then spending has risen even faster. Despite all of those troubling trends, Tennessee's no-income-tax policy continues to lure new business and investment, including new Nissan and Saturn assembly plants, to
the state. It may be that Tennessee is doing well in spite
of, not because of, McWherter.

Richards may be the most overrated governor in America.
She is undoubtedly one of America's most charismatic political figures. One of her central accomplishments was her
aggressive, effective promotion of NAFTA. Richards boasts
of being a fiscally moderate Democrat, but the state budget
trends suggest otherwise. In her first year the Texas
budget grew by an enormous 11.5 percent in real terms, or
more than $650 per family. That spending burst outpaced the
increases in all but a small handful of states. Texas has
no corporate or personal income tax, but Richards has resorted to an assortment of other business taxes and gas tax
hikes to bring more revenue into Austin. Worst of all, she
has consistently fumbled the political football of school
finance reform. Her original Robin Hood scheme to soak the
rich districts to pump more funds into the schools in poorer
districts was solidly rejected by the voters at the polls.
Two other plans have been rejected by the courts. Distancing herself from Bill Clinton, Richards says she wants to
run for reelection this year on the basis of her record.
That record has been inglorious at best.

Leavitt had an average fiscal record in his first year
in a very fiscally conservative state. His major accomplishment was to block new taxes to pay for water projects
and other public works. His major failing has been a complete unwillingness to challenge the extremely powerful
education establishment in Utah. He is against school
choice and for the litany of conventional school reforms.
That earned him the endorsement of the teachers' unions in
the 1992 campaign, but it holds little promise of improving
Utah's schools.

Dean, a physician by training, succeeded to office in
1991 when Republican governor Richard Snelling died in
office. Dean has held the growth of revenue and spending
below the rate of inflation. He has also pushed for welfare
entitlement reforms, including a reduction in AFDC. But his
major interest is health care, and he is leading Vermont in
the dangerous direction of universal access and a state
takeover of the health insurance industry. That could have
major negative implications for the fiscal future of Vermont.

In an era when many politicians pretend to be "new
Democrats," Wilder is the real thing. A grandson of slaves,
he was the first black to be elected governor in the nation.
He took over the Virginia state house in the midst of a
fiscal crisis made worse by painful Pentagon cutbacks in a
state where nearly one in five jobs is defense related.
Unlike the governors of virtually all other states in a
similar predicament, Wilder steadfastly resisted all new
taxes and vetoed repeated attempts by the legislature to
impose them. Wilder argued that "citizens should not bear a
heavier burden during this recession" and that more revenues
were "simply unnecessary." He was proven right. By holding
state spending to just over the inflation rate for four
years, he balanced the budget every year and preserved the
state's AAA bond rating. Ironically, in 1993 state revenues
accelerated by nearly 10 percent--far better revenue production without new taxes than many states experienced with
them. In 1992 Financial World magazine ranked Virginia as
the best state in the nation at handling the budget and
praised Wilder for "making mincemeat out of the stereotype
of free-spending governors." At the end of his term (Virginia does not allow governors to serve consecutive terms),
he left Virginia in excellent fiscal shape and with an
economy solidly on the rebound.

In his first year in office, Lowry set out to, as the
Almanac of American Politics put it, "make Washington a
laboratory for liberal reform." Lowry pledged during the
1992 campaign to raise taxes "only as a last resort." Then
after his election he raised taxes by $1 billion as a first
resort. The money will be used for a universal health care
program, which requires businesses to provide insurance for
all employees. (Hillary Clinton is said to have used the
Washington plan as a model for her national reforms.) The
taxpayer cost to cover the uninsured and the unemployed is
expected to top $2 billion by 2000, if the program is not
repealed. The plan is widely unpopular as is the governor
himself, according to recent public opinion polls. Lowry
has also lobbied for big increases in education funding and
for new "public-private partnerships" with business. So
far, Lowry looks like the Jim Florio of the West.

In the 1980s West Virginia had the slowest growth in
taxes and spending of any state. In the 1990s under Caper-
ton it has had one of the fastest growing budgets. During
his first term (1989-92), Caperton broke a no-new-taxes
pledge and passed a $400-million revenue raiser that includ-
ed broadening the sales tax base and doubling the gasoline
tax. During Caperton's first three years in office, West
Virginia's expenditures mushroomed by 7 percent per year
above inflation. In 1992 the state spent nearly $2,500 more
per family than it did in 1989. Most of that money has
flowed into the schools and teachers' paychecks, but there
is no indication that the schools are performing any better.
Meanwhile, the state has produced virtually no net new jobs
over the past four years. If Caperton's second term is like
his first, West Virginians are in for a long four years.

Wisconsin has served as the prototype "laboratory of
democracy" under Thompson. From welfare reform, to parental
choice in education, to supply-side tax cuts, Thompson has
been one of the nation's most creative and widely imitated
policy innovators. Over the past four years he has cut
income taxes, capital gains taxes, and inheritance taxes.
The tax burden in Wisconsin actually declined during Thompson's first five years in office. Only recent increases in
the corporate income and cigarette taxes mar his tax record.
However, Thompson has not been especially tightfisted. From
1987 through 1992 the budget grew by about 3 percent above
inflation per year--an increase of more than $1,000 per
family. The budget would have grown even faster had Thompson not employed his line-item veto more than 1,200 times to
cut hundreds of millions of dollars from appropriations
bills over the years. His welfare reform ideas have been
criticized by people on both the left and the right end of
the political spectrum as social engineering. But there is
no arguing with Thompson's results: from 1987 to 1993 AFDC
rolls expanded 31 percent nationwide, but they fell by 17
percent in Wisconsin. Some of that improvement is no doubt
a result of a remarkably strong economy in Wisconsin. In
1992 Wisconsin ranked in the top five states in job creation. Clearly, Thompson must be doing something right.

Sullivan's budget-cutting record from 1987 to 1992 was
second to none. Over those five years Sullivan held state
expenditures to below the inflation rate--a highly impressive feat. Much of the downsizing was the result of necessity; when the oil market went bust in the 1980s, Wyoming's
mining and energy tax revenues plummeted, throwing the state
government's finances into turmoil. In his first term
Sullivan radically reorganized government, trimming 79
agencies down to just 12. He instituted a work-for-welfare
program and dramatically shrank the government workforce.
For that, he received an A on Cato's first fiscal report
card. Unfortunately, his performance during his second term
has been mediocre. After he raised the sales tax by 1
percent and increased various fees, the budget started to
rise again. Given that Wyoming is already one of the nation's top five spending states on a per capita basis (even
after Sullivan's budget cutting), another budget build-up is
the last thing the state's struggling economy needs.